Cell Life

Today, there is a shocking news report which states that Sprint is considering spinning off Nextel business unit. Sprint acquired Nextel with great fanfare for $35 billion dollars and today’s announcement indicates that essentially that strategy has been a monumental failure. This is a glaring example of how large mergers in technology seldom work. The two technologies CDMA and iDEN from Sprint and Nextel were never fully integrated and Sprint tried hard to move the Nextel subscribers to the Sprint network, a strategy which failed not only due to technology integration issues but also due to completely different employee cultures in the two firms. Now Sprint is giving up on the integration challenge and considering spinning off Nextel, perhaps to make itself more attractive to potential bidders.

Sprint may also spin off Nextel into a separate company. Separately, Deutsche Telekom is mulling a bid for Sprint and wants to combine its US carrier unit T-Mobile with Sprint, in effect combining the third and fourth largest US wireless operators to create the largest one ahead of AT&T and Verizon. We feel that this is a no-go to begin with - this would not pass the muster with US Antitrust department. Not sure how Deutsche Telekom can imagine a run for Sprint knowing fully well that it is a difficult antitrust case.

Yet another angle to the Sprint saga involves a complex WiMAX transaction with ClearWire. The combined entity is looking for funding and Google, Intel etc are supposedly interested.

With so many big endeavours, Sprint management and their CEO Dan Hesse have their work cut out. Lets see where this one ends. To us, it had seemed that a combination with Comcast would have made a more logical sense for Sprint.

MT